Olympus under pressure to reveal details of deals

Michael Woodford

REUTERS

Olympus President Michael Woodford at the company headquarters in Tokyo in May 2011. Japan's Olympus Corp fired Woodford on Friday, blaming the Briton in unusually blunt terms on Friday for trying to shake up 92 years of the firm's management culture

Olympus President Michael Woodford at the company headquarters in Tokyo in May 2011. Japan's Olympus Corp fired Woodford on Friday, blaming the Briton in unusually blunt terms on Friday for trying to shake up 92 years of the firm's management culture (REUTERS)

TOKYO, Oct 18 (Reuters) - Japan's Olympus came under more pressure to disclose details of payments made in a series of acquisitions as its shares plunged for a third straight day following the unexpected dismissal of its chief executive last week.

British former CEO Michael Woodford, who had worked for the camera maker for 30 years, has told media he believes he was ousted for probing what he said were excessive payments related to the buyouts of British medical equipment maker Gyrus and three small domestic firms.

The Japanese firm reiterated in a statement on Tuesday that Woodford was dropped because of a clash in management.

The Tokyo company is parent to Olympus Corporation of the Americas, which has headquarters at Stabler Corporate Center. At the end of 2010, the company had more than 900 Lehigh Valley employees and an annual local payroll of $100 million. Its products include digital cameras, research microscopes and minimally invasive surgical devices such as machines used to give colonoscopies

Olympus, which also makes precision instruments, said in an investor conference call on Monday it may take legal action against the former CEO for disclosing confidential information in media reports after his firing.

But analysts and investors remain dissatisfied after Woodford showed media a letter dated Oct. 11 to chairman Tsuyoshi Kikukawa, which describes what he calls "a catalogue of calamitous errors and exceptionally poor judgment" resulting in the "destruction of shareholder value of $1.3 billion".

Olympus shares fell 8.9 percent on Tuesday, for a total loss of almost 43 percent over three straight days since his dismissal.

DISCLOSURE URGED

Woodford's letter details concerns about $680 million in payments to financial advisers in the acquisition of Gyrus, or one-third of the transaction price, and $600 million in goodwill impairment after the acquisitions in Japan.

In it, he also calls on Kikukawa and executive vice president Hisashi Mori to resign.

Kikukawa told the Nikkei newspaper in an interview that the Gyrus payment was about 30 billion yen ($391 million), saying this was an amount he had been advised by accountants and lawyers was appropriate.

"We do not think the market's confidence can be restored based on what we heard during the conference call," said analyst Motoya Kohtani of Nomura in a note to clients.

"With a former president playing the unusual role of whistle blower, the level of disclosure by Olympus thus far is unlikely to alleviate market concerns," he added.

"We think management should disclose the advisory fees paid for the Gyrus acquisition, broken down into preferred dividend stock, options and cash."

Downgrades of Olympus's target price from brokerages, including Macquarie, continued after Monday's investor call.

Woodford told BBC radio he had gone to Britain's Serious Fraud Office regarding the acquisition of Gyrus, because most of the deal was paid for through Olympus Finance UK.

He told Britain's Independent newspaper he had been shocked to find that Olympus was run as a "total emperor system", while experts also expressed astonishment.

"Usually globally the CEO has access to all the relevant information," said Robert McCormick, chief policy officer at Glass Lewis & Co, a proxy advisory firm. "I think it's pretty astounding that they seem to have been treating him on a need-to-know basis when he was leading the company."

Japan's Financial Services Agency said it was aware of media reports on Olympus but declined to comment on whether it was considering taking action. ($1 = 76.720 Japanese Yen)